Saylor URL: http://www.saylor.org/books Saylor.org
Another useful way to compare financial statements is to look at how the situation has
changed over time. Comparisons over time provide insights into the effects of past
financial decisions and changes in circumstance. That insight can guide you in making
future financial decisions, particularly in foreseeing the potential costs or benefits of a
choice. Looking backward can be very helpful in looking forward.
Fast-forward ten years: Alice is now in her early thirties. Her career has progressed, and
her income has grown. She has paid off her student loan and has begun to save for
retirement and perhaps a down payment on a house.
A comparison of Alice’s financial statements shows the change over the decade, both in
absolute dollar amounts and as a percentage (see Figure 3.22 "Alice’s Income
Statements: Comparison Over Time", Figure 3.23 "Alice’s Cash Flow Statements:
Comparison Over Time", and Figure 3.24 "Alice’s Balance Sheets: Comparison Over
Time"). For the sake of simplicity, this example assumes that neither inflation nor
deflation have significantly affected currency values during this period.
Figure 3.22 Alice’s Income Statements: Comparison Over Time